2002 (5) TMI 15 - HC - Income Tax

s.271(1)(c) penalty set aside for AY 1988-89; deductions found arguable, not concealment or inaccurate particulars

HC upheld the Tribunal and set aside the penalties under s.271(1)(c) for AY 1988-89, finding the assessee's claim of deductions was arguable and did not ... Penalty proceedings under section 271(1)(c) - HELD THAT:- The application relates to the assessment year 1988-89. The assessment year A was completed on December 28, 1988, under section 143(3) of the Income-tax Act and a total income was assessed at Rs. 12,29,580. The assessee in the original return filed on June 30, 1988, declared total income of Rs. 10,09,950 but in the revised return filed on December 27, 1988, he declared total income at nil as there was addition on account of wrong claim of deduction under sections 80HH and 80-I. The penalty proceedings under section 271(1)(c) had been initiated and penalty of Rs. 8,60,000 was imposed by the Assessing Officer. The Commissioner of income-tax (Appeals) has also confirmed the penalty but reduced the penalty amount to Rs. 6,25,510. In appeal before the Tribunal, the Tribunal has cancelled the penalty so imposed, holding that the assessee has claimed the deductions on arguable grounds and if that has not been allowed, the penalty under section 271(1)(c) cannot be imposed automatically. The finding of the Tribunal that when the assessee has claimed some amount though that is debatable, in such cases, it cannot be said that the assessee has concealed any income or furnished inaccurate particulars for evasion of the tax. In view of the findings of the Tribunal, no case is made out for interference by this court. - In the result, we answer all the four questions in the affirmative, i.e., in favour of the assessee and against the Revenue. Issues:1. Justification of canceling penalty under section 271(1)(c)2. Validity of higher deductions claimed under Chapter VI-A in revised return3. Consistency in income figures and burden of proof under Explanation to section 271(1)(c)Analysis:Issue 1:The case involved the cancellation of a penalty imposed under section 271(1)(c) for the assessment year 1988-89. The Tribunal had initially imposed a penalty, which was later canceled on appeal. The Tribunal held that the assessee's claim for deductions was arguable and debatable, indicating that the penalty could not be imposed automatically if deductions were disallowed. The Tribunal emphasized that the total income figures remained consistent across original and revised returns, and the assessee had paid the appropriate tax amount. Consequently, the Tribunal found that the penalty under section 271(1)(c) was unjustified, and the burden of proof had been successfully discharged by the assessee.Issue 2:Another aspect of the case involved the validity of the higher deductions claimed under Chapter VI-A in the revised return filed by the assessee. The Tribunal considered the claim of higher deductions as bona fide, based on legal opinion obtained by the assessee, despite the claim not aligning with the provisions of the law. The Tribunal noted that the claim was arguable and debatable, and the assessee had the right to raise such claims without facing penalties under section 271(1)(c). The Tribunal's decision was based on the principle that penalizing debatable claims would be contrary to legislative intent.Issue 3:The Tribunal also examined the consistency in income figures and the burden of proof under the Explanation to section 271(1)(c). It was observed that the total income figures, tax computations, and deductions remained the same across original and revised returns, indicating no concealment or evasion of tax. The Tribunal emphasized that the assessee had paid the appropriate tax amount, and no additional tax was payable. Therefore, the Tribunal concluded that the penalty under section 271(1)(c) was unwarranted, and the burden of proof had been effectively discharged by the assessee.In conclusion, the High Court upheld the Tribunal's decision, ruling in favor of the assessee and against the Revenue on all four questions referred for opinion. The Court found no grounds for interference based on the Tribunal's findings, leading to the disposal of the reference accordingly.